special economic zones

At the World Free Zone Convention in Izmir, Turkey, which I attended in December, an important question was asked: Have "Special Economic Zones" entered the 21st Century? Evidence shows that, in many ways, they have – but in many instances we are still seeing across the globe the same isolated economic enclaves with few linkages to the local market and little economy-wide impact.

More than ever, special economic zones (SEZs) are on the defensive, despite the fact that the more than 3,500 SEZs worldwide have provided employment for more than 60 million people.

I believe that two zones, in particular, can shed light on the factors of success and failure in SEZs today: Shenzhen, China, which is almost universally considered to be a success story, and the Calabar Free Trade Zone in Nigeria, which has failed to live up to its original projections.

Why do so many industrial park programs fail? They are popular across the developing world, inspired perhaps by China, where they are widely used as a policy tool and where their products are impressive to the visitor: functional parks with many firms and bustling activity. But horror stories abound, even in China, of empty parks, subsidized land speculation and tax erosion, and often no parks at all. This has not dampened enthusiasm, however. The theory is simply too seductive. By providing high-quality, shared infrastructure to firms in specific areas, industrial parks are meant to create pockets of competitiveness that eventually spill over onto the rest of the economy. For capacity-constrained governments, they have the further appeal of focus.